The US should make a ‘down payment’ this year on tackling its budget deficit, the International Monetary Fund has warned, as it emerged that the world’s biggest bond investor is shorting the country’s bonds.

America will rack up a budget deficit of 10.8pc of gross domestic product this year, the largest of any of the developed economies, the IMF said in its latest Fiscal Monitor report. In sharp contrast to Britain and much of the rest of Europe, the US has so far delayed any move to cut its budget deficit.

Bill Gross, who manages the world’s biggest bond fund at Pacific Investment Management Co (Pimco), said it was the failure of politicians in Washington DC to take the country’s deficit – estimated to reach about $1.5 trillion next financial year – seriously that has prompted him to start positioning the $236bn Total Return Fund to benefit from a drop in US government bond. In February, the fund sold its US governments bonds, or Treasuries.

« Without attacking entitlements – Medicare, Medicaid and Social Security – we are smelling $1 trillion deficits as far the nose can sniff, » Mr Gross said in the firm’s monthly outlook.